Wall Street dives, setting the ASX up for heavy losses at open

Daniel Fowler
October 11, 2018

US stocks slipped Wednesday, putting the S&P 500 on course for a fifth consecutive session of declines as government-bond yields kept rising.

Stocks fell Wednesday as concerns about global economic growth and ongoing trade tensions continued to hang over Wall Street and after the bond market resumed a sell-off that started last week. Yields on 3-year notes have recently traded just above 3.0 percent, providing long-absent competition for investment returns with equities.

But it was the rout across the Atlantic that proved even more eye-catching with the rise in US Treasury bond yields to seven-year highs seen as a key factor.

Bond yields and therefore interest rates have been rising for more than two years as the US economy grew strong.

Sears nosedived after the Wall Street Journal reported that the struggling retailer hired an advisory firm to prepare a bankruptcy filing that could come within days.

The S&P 500 was down 55 points, or 1.9 percent, at 2,824-on pace for its worst day since June. Eastern time. It's on pace to be the index's worst day since February 5, when it lost over 1,100 points in a single trading day.

Oil prices fell more than 2 percent as U.S. stocks plunged, even though energy traders anxious about shrinking supply from Iran due to U.S. sanctions and kept an eye on Hurricane Michael, which closed almost 40 percent of U.S. Gulf of Mexico output.

Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in USA interest rates.

Microsoft lost 1.4 per cent in early trading Wednesday and 3M gave up 1.6 per cent. The Russell 2000 index of smaller-company stocks shed 37 points, or 2.3 percent, to 1,584.

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The S&P/NZX 50 index declined 19.16 points, or 0.2 per cent, to 9050.82.

COMMODITIES: Benchmark U.S. crude oil fell 60 cents to $74.36 per barrel.

Technology and internet-based companies are known for their high profit margins, and many have reported explosive growth in recent years, with corresponding gains in their stock prices.

Higher bond rates can weigh on stocks as they provide more competition for yield-hungry investors.

The S&P 500 fell 54 points, or 1.9 percent, to 2,825. Natural gas rose 0.6 percent to $3.28 per 1,000 cubic feet.

The CAC 40 in France dropped 2.1 percent, Germany's DAX lost 2.2 percent and the FTSE 100 in London fell 1.3 percent. Silver dipped 0.5 percent to $14.33 an ounce. "That suggests the Fed will keep raising rates, and that's taking the wind out of the stocks that have done the most, particularly in the tech sector".

Tom Cahill of Ventura Wealth Management said investors were also unnerved by remarks from luxury company LVMH of a crackdown on some goods in China amid the country's bitter dispute with the United States.

Stocks from emerging markets were also hard hit. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent. The euro rose to $1.511 from $1.1496 late Tuesday, and the British pound rose to $1.3175 from $1.3146.

The Japanese yen strengthened 0.53 percent versus the greenback at 112.36.

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